Target Reports Fourth Quarter and Full-Year 2014 Earnings

MINNEAPOLIS - February 25, 2015
  • Fourth quarter comparable sales increased 3.8 percent, reflecting a 3.2 percent increase in comparable transactions. Digital channel sales contributed 0.9 percentage points to comparable sales growth.
  • Target’s fourth quarter 2014 Adjusted EPS of $1.50 was above the company’s most recent guidance of $1.43 to $1.47 per share.
  • Target’s full-year comparable sales grew 1.3 percent. Digital channel sales growth of more than 30 percent contributed 0.7 percentage points to 2014 comparable sales growth.
  • Target paid dividends of $1.2 billion in fiscal 2014, an increase of 19.8 percent above 2013.

MINNEAPOLIS (Feb. 25, 2015) – Target Corporation (NYSE: TGT) today reported fourth quarter 2014 Adjusted earnings per share1 of $1.50, an increase of 14.9 percent from $1.31 in 2013, and full-year Adjusted earnings per share of $4.27, a decrease of 2.6 percent from $4.38 last year. GAAP earnings per share from continuing operations were $1.49 in fourth quarter and $3.83 in full-year 2014, compared with $1.22 and $4.20 in 2013, respectively. In fourth quarter, Target recognized a pre-tax loss of $5.1 billion related to its discontinued Canadian operations, resulting in a $(5.59) loss per share. The tables attached to this press release provide a reconciliation of non-GAAP to GAAP measures. All earnings per share figures refer to diluted earnings per share.

“We’re pleased with our fourth quarter financial results, which were driven by betterthan-expected sales and particularly strong performance in our signature categories—style, baby, kids and wellness,” said Brian Cornell, chairman and chief executive officer of Target Corporation. “We’re seeing early momentum in our efforts to transform Target, and our team is entering the new fiscal year with a singular focus on continuing to differentiate our merchandise assortment and shopping experience while controlling costs by reducing complexity and simplifying the way we work. We’re confident that these efforts will allow us to grow our earnings while returning cash to our shareholders in 2015 and beyond, driving improvements in Target’s return on invested capital and creating long-term value for our shareholders.”

Fiscal 2015 Earnings Guidance

In first quarter 2015, Target expects Adjusted EPS, reflecting results of operations in its single-segment business, of $0.95 to $1.05, compared with $0.92 in first quarter 2014. The Company will provide full-year 2015 guidance at its meeting with the financial community on March 3, 2015, from approximately 2:30 p.m. to 5:00 p.m. EST. Investors and others are invited to access the presentations and Q&A session online on the Events & Presentations section of 

Results of Continuing Operations

Fourth quarter 2014 sales increased 4.1 percent to $21.8 billion from $20.9 billion last year, reflecting a 3.8 percent increase in comparable sales combined with sales from new stores. Segment earnings before interest expense and income taxes (EBIT) were $1,603 million in fourth quarter 2014, an increase of 13.4 percent from $1,413 million in 2013.

Fourth quarter EBITDA and EBIT margin rates were 9.9 percent and 7.4 percent, respectively, compared with 9.2 percent and 6.8 percent in 2013. Fourth quarter gross margin rate was 28.5 percent, compared with 27.6 percent in 2013, reflecting the benefit of annualizing clearance markdowns associated with the fourth quarter 2013 data breach, combined with the benefit of a favorable merchandise mix in fourth quarter 2014. Fourth quarter SG&A expense rate was 18.6 percent in 2014 compared with 18.4 percent in 2013, reflecting higher marketing, technology and incentive expense rates this year. 

Full-year 2014 sales increased 1.9 percent to $72.6 billion from $71.3 billion last year, reflecting a 1.3 percent increase in comparable sales combined with sales from new stores. Fullyear EBIT was $4,761 million in 2014, a decrease of 4.0 percent from $4,959 million last year. 

Full-year 2014 EBITDA and EBIT margin rates were 9.5 percent and 6.6 percent, respectively, compared with 9.8 percent and 7.0 percent in 2013. Full-year gross margin rate was 29.4 percent, compared with 29.8 percent in 2013, driven by increased promotional activity in the first three quarters of 2014. Full-year SG&A expense rate was 19.9 percent in 2014 compared with 20.0 percent in 2013, reflecting disciplined expense control across the organization. 

Interest Expense and Taxes from Continuing Operations

The Company’s fourth quarter 2014 net interest expense was $151 million, compared with $142 million last year. Full-year net interest expense was $882 million in 2014 and $1,049 million in 2013. Excluding losses of $285 million and $445 million related to the early retirement of debt in 2014 and 2013, respectively, full-year 2014 net interest expense was approximately flat to last year. 

The Company’s fourth quarter effective income tax rate from continuing operations was 33.0 percent in 2014 and 33.5 percent last year. Target’s full-year 2014 effective income tax rate from continuing operations decreased 1.6 percentage points to 33.0 percent from 34.6 percent in 2013, which was driven primarily by the net tax effect of the Company’s global sourcing operations and the favorable resolution of various income tax matters.

Capital Returned to Shareholders

Target paid dividends of $330 million in fourth quarter, a 21.6 percent increase from $272 million in 2013. In full-year 2014, the Company paid dividends of $1,205 million, a 19.8 percent increase from $1,006 million last year. 

Target did not repurchase any shares of its common stock through open market transactions during fourth quarter or full-year 2014.

Discontinued Operations

On January 14, 2015, following a comprehensive assessment of Canadian operations, Target’s Board of Directors approved a plan to discontinue operating stores in Canada. As a result of the decision, Target recorded a pretax impairment loss and other charges of $(5,105) million in fourth quarter 2014. After-tax losses from discontinued operations were $(3,600) million in fourth quarter, or $(5.59) per share, and $(4,085) million in full-year 2014, or $(6.38) per share.  

Certain of the assets and liabilities of Target’s discontinued operations are based on estimates. The recorded assets include estimated receivables, and the remaining liabilities include accruals for estimated losses related to claims that may be asserted against Target Corporation, primarily under guarantees of certain leases. Given the early stage of its exit, these estimates involve significant judgment and are based on currently available information, an assessment of the validity of certain claims, and estimated payments by the Canada Subsidiaries. The Company believes that it is reasonably possible that future adjustments to these amounts could be material to its results of operations in future periods. Any such adjustments would be recorded in discontinued operations.

Accounting Considerations

During fourth quarter 2013, Target experienced a data breach in which an intruder gained unauthorized access to its network and stole certain payment card and other guest information. The Company incurred breach-related expenses of $4 million in fourth quarter 2014 and fullyear net expense of $145 million, which reflects $191 million of gross expense partially offset by the recognition of a $46 million insurance receivable. Fourth quarter and full-year 2013 net expense related to the data breach was $17 million, reflecting $61 million of gross expense partially offset by the recognition of a $44 million insurance receivable. 

At the close of the sale of its entire U.S. consumer credit card receivables portfolio to TD Bank Group in first quarter 2013, Target recognized a $225 million beneficial interest asset. The fourth quarter and full-year 2014 beneficial interest asset reductions were $13 million and $53 million, respectively, compared with $16 million and $98 million in the same periods last year. Since the close of the transaction, the beneficial interest asset has been reduced by $151 million.


Target Corporation will webcast its fourth quarter earnings conference call at 9:30 a.m. CST today. Investors and the media are invited to listen to the call through the Company’s website at (click on “events & presentations”). A telephone replay of the call will be available beginning at approximately 11:30 a.m. CST today through the end of business on Feb. 27, 2015. The replay number is (855) 859-2056 (passcode: 39278650). 

Statements in this release regarding first quarter 2015 earnings per share guidance and future expenses related to discontinued operations are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements speak only as of the date they are made and are subject to risks and uncertainties which could cause the Company’s actual results to differ materially. The most important risks and uncertainties are described in Item 1A of the Company’s Form 10-K for the fiscal year ended Feb. 1, 2014 and Item 1A of the Company’s Form 10-Q for the quarter ended Nov. 1, 2014.

In addition to the GAAP results provided in this release, the Company provides Adjusted diluted earnings per share for the three- and twelve-month periods ended Jan. 31, 2015 and Feb. 1, 2014, respectively. This measure is not in accordance with, or an alternative for, generally accepted accounting principles in the United States. The most comparable GAAP measure is diluted earnings per share from continuing operations. Management believes Adjusted EPS is useful in providing period-to-period comparisons of the results of the Company’s ongoing retail operations. Adjusted EPS should not be considered in isolation or as a substitution for analysis of the Company’s results as reported under GAAP. Other companies may calculate Adjusted EPS differently than the Company does, limiting the usefulness of the measure for comparisons with other companies.

About Target

Minneapolis-based Target Corporation (NYSE: TGT) serves guests at 1,790 stores and at Since 1946, Target has given 5 percent of its profit to communities, that giving equals more than $4 million a week. For more information, visit For a behind-the-scenes look at Target, visit or follow @TargetNews on Twitter.

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